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By Pierre Lemieux
One of the mysteries of the universe is that it is logical. Whether in geometry, in physics, or in economics, purely logical theories explain the messy world. It is true that some theories are contradicted by empirical evidence, which suggests that they are not applied to the right problem, or that their assumptions have not been chosen wisely. Yet, some logical theories that seem at first inapplicable to the real world often end up finding applications; I understand that quantum...
Pierre Lemieux recently did a post explaining how people often misinterpret the GDP expenditure equation: GDP = C + I + G + (X-M) Many people, including even top trade officials in the Trump administration, wrongly assume that this equation demonstrates that imports subtract from...
Nothing about comparative advantage suggests there would be no trade deficit. Nothing whatsoever (further, Ricardo was incorrect to suggest all production could/would shift. Interestingly, he seems to have missed the key insight of his model).
Jon Murphy , September 17, 5:43 pm.